Chase_6615_ch4 - Andrew Chase Intermediate Accounting...

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Andrew Chase Intermediate Accounting Chapter 4 4-1 The kinds of questions investors and creditors ask about future cash flows are how to evaluate past performance and to how to see the likelihood of achieving particular levels of cash flows in the future. This is done by analyzing the data of revenues, expenses, gains, and loses to help evaluate performance. 4-6 Earnings management is the planned timing of revenues, expenses, gains, and loses to smooth out bumps in earnings. Many times this is done to increase earnings for the current year at the expense of income in the future years. 4-7 Earnings management can affect the quality of earnings by distorting the information in a way that is less useful for predicting future earnings and cash flow. This can be detrimental because investors rely on trust, and if they feel that the information is misleading or distorted it will most likely lead to the stock price dropping dramatically. 4-10 The main distinction between revenues and gains are that revenues come from the
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This note was uploaded on 12/07/2009 for the course ACCT 5521 taught by Professor Englese during the Spring '08 term at Fairleigh Dickinson.

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Chase_6615_ch4 - Andrew Chase Intermediate Accounting...

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